The PORT.c Model

Portfolio Selection Problem with a Restriction on the Number of Assets

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MINIMIZE 0.5 w'Q w

sum_i w(i) = 1
sum_i r(i)w(i) >= R
for_i w(i) - u(i) x(i) <= 0 i=1...n
sum_i x(i) <= K
for_i x(i) are binary i=1...n

r(i) : return on asset i.
u(i) : an upper bound on the proportion of total budget that could be invested on asset i.
Q(i,j): covariance between the returns of i^th and j^th assets.
K : max number of assets allowed in the portfolio
w(i) : proportion of total budget invested on asset i
x(i) : a 0-1 indicator if asset i is invested on.


Portfolio | Portfolio Selection |